Correlation Between Aguas Andinas and Sociedad Matriz

Can any of the company-specific risk be diversified away by investing in both Aguas Andinas and Sociedad Matriz at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Aguas Andinas and Sociedad Matriz into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aguas Andinas SA and Sociedad Matriz SAAM, you can compare the effects of market volatilities on Aguas Andinas and Sociedad Matriz and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Aguas Andinas with a short position of Sociedad Matriz. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aguas Andinas and Sociedad Matriz.

Diversification Opportunities for Aguas Andinas and Sociedad Matriz

0.05

Correlation Coefficient

Aguas Andinas  Sociedad Matriz

Significant diversification

The 3 months correlation between Aguas and Sociedad is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Aguas Andinas SA and Sociedad Matriz SAAM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sociedad Matriz SAAM and Aguas Andinas is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Aguas Andinas SA are associated (or correlated) with Sociedad Matriz. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sociedad Matriz SAAM has no effect on the direction of Aguas Andinas i.e., Aguas Andinas and Sociedad Matriz go up and down completely randomly.

Pair Corralation between Aguas Andinas and Sociedad Matriz

Assuming the 90 days trading horizon Aguas Andinas SA is expected to generate 1.16 times more return on investment than Sociedad Matriz. However, Aguas Andinas is 1.16 times more volatile than Sociedad Matriz SAAM. It trades about 0.11 of its potential returns per unit of risk. Sociedad Matriz SAAM is currently generating about 0.01 per unit of risk. If you would invest  27,182  in Aguas Andinas SA on September 5, 2024 and sell it today you would earn a total of  2,518  from holding Aguas Andinas SA or generate 9.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Aguas Andinas SA  vs.  Sociedad Matriz SAAM

Aguas Andinas SA

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aguas Andinas SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Aguas Andinas may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sociedad Matriz SAAM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sociedad Matriz SAAM has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sociedad Matriz is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aguas Andinas and Sociedad Matriz

The main advantage of trading using opposite Aguas Andinas and Sociedad Matriz positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aguas Andinas position performs unexpectedly, Sociedad Matriz can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Sociedad Matriz will offset losses from the drop in Sociedad Matriz's long position.

The idea behind Aguas Andinas SA and Sociedad Matriz SAAM pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.